2.1.4 Planning

Cards (9)

  • Purpose of a Business Plan
    -Show lenders that the firm is profitable and can repay loans
    -Attract investors
    -To give owners direction and set targets and goals
    -Identify any problems early on
    -To monitor their efficiency in meeting goals
  • Business Plan
    A document outlining plans to make a successful business by realising it's objectives
  • Features of a Business Plan
    -Cash flow forecast to show interest can be paid
    -Name of the business
    -4Ps of marketing
    -HR
    -Costs and suppliers
    -Premises and how it will be financed
    -Financial information: revenue, costs, profits
  • Benefits of a Business Plan
    -Negotiate a lower interest rate/ % of equity to VCs
    -Monitor if they are meeting goals
  • Cash Flow Forecast
    Predicts the inflows and outflows of cash in a given time
  • Uses of Cash Flow Forecasts
    -Monitor cash inflows and outflows to arrange suitable finance for shortages eg. overdraft
    -Helps secure a better deal eg. lower rate loan
  • Limitations of a Cash Flow Forecast
    -12 months is a very short term to make any financial decisions longer-term finance may be needed
    -Actual sales or expenses may be higher/lower
    -Only about cash available to pay short-term debts
    -Needs a balance sheet and a profit loss statement
    -Very risky to rely on the forecast alone for decisions
  • Ways to Improve Cash Flow
    -Leasing rather than buying equipment
    -Renting rather than buying
    -Postponing spending
    -Quickly selling goods
    -Keeping stocks of raw materials to a minimum
  • Just-in-time
    Ordering stock so that it arrives just before it is needed